Canada and the United States both felt that their very existence as coherent countries depended on the construction of transcontinental railroads, but they followed dramatically different paths. The Canadians started with a major political scandal, and triumphantly produced a splendidly honest railroad. The Americans started with high hopes and ended, a mere seven years after the passage of the act authorising the building of the railroad, with a traumatic scandal following the discovery that a construction company, the Credit Mobilier, controlled by the railroad’s promoters, was siphoning off most of the considerable profits available from building the railroad. The original Credit Mobilier was a French bank, promoted by the Pereires, designed to widen the investment possibilities open to the petit bourgeoisie. It often invested in railways, but did not otherwise resemble its American namesake, which was a conspiracy of insiders, the opposite of the French original.
At the time the ‘Big Four’* who had pledged their credit to achieve the Western section of the railroad, were more successful in escaping public odium than their Eastern counterparts. But their exploitation of the Central Pacific’s monopoly position created a radical strain in Californian politics which lasted for several generations.
Canadian politicians were as bad as their American equivalents. In the late 1840s a British businessman, Sir Edmund Hornby, crossed the Atlantic to lobby for the Grand Trunk railway and found that ‘some twenty-five members, contractors, etc were simply waiting to be squared either by promises of contracts or money, and as I had no authority to bribe they simply abstained from voting and the Bill was thrown out. Twenty-five thousand pounds would have bought the lot, but I would rather someone else had the job than myself … As usual it was a psalm-singing Protestant Dissenter who, holding seven or eight votes in the palm of his hand, volunteered to do the greasing job for a consideration.’ (Autobiography)
The inter-provincial balancing act, complete with politically-inspired payments and subsidies, continued in full flood even after the provinces had received their railroad mileage in return for adherence to the Federation. The same atmosphere hung over the first attempt at a Canadian transcontinental railroad. This ended in the disgrace of the Prime Minister, Sir John Macdonald, after smashing attacks on him for being in the hands (and the pay) of Sir Hugh Allan, the financier behind the scheme.
In the United States, General Grant was re-elected President even after the Credit Mobilier scandal, but the Canadians took their principles seriously enough to get rid of the politicians they believed to be guilty. In fact, Macdonald and his colleagues had merely been indiscreet, but a verdict of not proven did not satisfy the electorate at the time. The government’s own attempts to survey the route were no more successful. In 1880 a Royal Commission found that the work ‘was carried on as a Public Work at a sacrifice of money, time and efficiency’, largely because everyone involved had been selected because of their political allegiances, not their qualifications for the job.
Even when the Canadians found themselves with an honestly-built transcontinental railroad, the politicians would not let well alone. The CPR’s monopoly provided a splendid excuse for Sir Wilfred Laurier to promote his idea of a rival road, a dream naturally exploited by two ambitious financiers, Mackenzie and Mann.
The eventual result, the Canadian National, involved decades of political shenanigans. When Mackenzie and Mann asked for federal guarantees to build the line between Saskatoon and Calgary, the Canadian Conservative politicians ‘failed to oppose the scheme in Parliament, probably because Tory insiders were shown the route of the proposed line, a piece of information that allowed a favoured few to buy up land close to the right of way.’20 Almost inevitably the CNR was always struggling and was duly nationalised just after World War I.
Even privately-owned railways were subject to government supervision. In Britain the railways division of the British Board of Trade dates back to 1841. However it was subject not only to politicians’ whims but also to the prevailing mood of the day, and thus swung between allowing the railways to regulate their own affairs and – a mood particularly prevalent after a major crash – a determination to assert the primacy of the public interest.
The companies became adept at delaying or evading regulations. For instance the 1844 Regulating Act provided that every company had to run at least one train every day to serve all the inhabitants along its route. The train had to stop at every station, cheap fares would be available, and the train had to average at least 12 mph. These ‘Parliamentary trains’ became a long-standing joke, famous for their inconvenience, discomfort and snail-like pace.
The companies’ long-term rear-guard action against regulation was helped by the ‘railway interest’, the first major, organised, feared – and overrated – industrial lobby. Opponents alleged that the legislature was dominated by members dedicated more to the railways than to the common good.
On the face of it the critics seemed to have a case. For a generation after the great influx resulting from the railway boom of the 1840s there were never fewer than a hundred Members of Parliament with some railway connections. Nevertheless, as Geoffrey Alderman has shown,21 there was a gulf between appearance and reality. Most of the members of the ‘interest’ were directors of local railways; they were not tied to the major companies most likely to come into conflict with government. However, they were powerful enough to block much legislation for the twenty years after 1846, a period when Parliament was dominated by interest groups rather than parties. In this atmosphere political pressure for effective control or eventual nationalisation naturally evaporated. It was only after the Reform Bill of 1867, and the resulting reinforcement of party discipline, that Parliament started to act, albeit mainly on settlements of railway disputes. Earlier regulations had assumed that the railways would play fair, would reduce their charges in return for protection from competition. Of course they didn’t.
Yet even after a series of crashes in the early 1870s, even after the companies had refused to accept government-imposed brakes (partly because they could not agree on the type they would fit) the Board of Trade’s inspectors were still divided as to whether legislation was needed or whether they could rely on ‘the persuasive power of public opinion as a means of securing the adoption of safety devices’. Not surprisingly by 1884 even The Times was calling for government regulation of railways on behalf of the public.
The laissez-faire attitude was still far more powerful than it was in Continental Europe. The British companies, for instance, waged a long campaign to avoid granting automatic protection to workmen injured at work, whereas in France railway companies were bound to provide compensation even if they were in no way to blame.
Even in Britain, however, nationalisation had had its advocates from the very beginning. John Ruskin, for one, had always believed that ‘all means of public transport should be provided at public expense, by public determination where such means are needed, and the public should be its own “shareholder”.’ During the debates of the early 1840s many pioneers, including the great contractor Thomas Brassey and, more surprisingly, George Hudson, the Railway King, testified that a controlled monopoly was the best form of railway management. Competition, Hudson pointed out – and later experience in the United States proved his point – led to ruinous undercutting of rates, inevitably succeeded by agreements not to compete, what the Americans called ‘pools’. In the United States, freight railroads are still privately owned and in Britain it took until 1923 to group the companies into four giant concerns, and a further quarter of a century before Britain followed the rest of Europe and nationalised its lines.
Government ownership provided ample opportunity for direct electoral profit. The Canadians soon saw the possibilities. In the Maritime Provinces, particularly, ‘railway employees were not allowed to vote as they pleased but “were driven to the polls like sheep”.’22 Such behaviour naturally provided considerable opportunities for the opposition. ‘Government management of the Inter-colonia
l is monstrous. The next thing that Ottawa will try to manage will be the weather.’
Australia probably had the greediest politicians in the English-speaking world. As The Times reported in May, 1913: ‘not only were railways constructed so as to maintain a Ministry’s majority in Parliament, but ministerialists obtained contracts for supplies, and even jobbed their constituents into places and procured the adoption of their own inferior inventions on the lines.’
Not unexpectedly the battle between the companies and the ‘public interest’ was waged most fiercely in the United States, where public support had never implied public ownership but, equally, private ownership did not imply public approval. Popular opinion was first mobilised by two scandals which erupted almost as soon as the Transcontinental railroad had been completed: the Credit Mobilier and the uproar on Wall Street known as the Erie Scandal.* To the average American it seemed that railway construction was inevitably crooked, a corruption matched only by that of politicians benefiting from dealing in the stocks of railroad companies.
The railroads represented a frightening new phenomenon, an industrial monster which dictated its terms to politicians, farmers, businessmen, as well as its employees. By their arrogance, their greed, they had alienated almost everyone not directly in their pay. During the 1870s the only power strong enough to face them was John D. Rockefeller’s Standard Oil, a trust more unified, more sophisticated, and thus more powerful than any combination of railroads. Popular opposition was only patchily effective until it was reinforced by the commercial interest, the manufacturers and merchants who also suffered from railway power.
The first effective opposition movement brought mid-Western farmers together in the famous ‘Grange movement’. Their official name was the Patrons of Husbandry, their leader, Oliver Hudson Kelley, a clerk in the Agricultural Bureau in Washington. Their organisation echoed that of the Masons, but was open to both sexes. Women were Gleaners and Shepherdesses, their menfolk Harvesters and Husbandmen. Their objective was simple, ‘protection from the intolerable wrongs now inflicted on us by the railroads’.
Their strength grew after 1873 as the effects of a major financial crisis spread to the western plains. By early 1875 the Grange’s 21,000 branches had 700,000 members concentrated in the Mid-West. They were not political activists but a single-issue pressure group, forcing politicians to pledge their opposition to the railroads, above all the crippling freight rates they charged small farmers. Within a few years several states had passed ‘Granger Laws’ prohibiting free passes, establishing state railroad commissions, ensuring that railroads did not discriminate against short-haul traffic and even laying down detailed freight rates aimed at the infamous ‘pools’ by which major companies removed any competition.
The Grangers were joined by manufacturers in the Eastern states, mostly too small to benefit from the rebates granted to the likes of Standard Oil. Indeed it was one Mr Sterne, a member of the ultra-respectable New York Board of Trade and Transportation, who complained that23 ‘railroading can never be considered a private business’. Not only did ‘the roads exercise the right of eminent domain’. More importantly ‘they had abandoned even the pretence of competition between themselves, and have cast aside the whole basis of American legislation which proceeded on the principle of competition’. The railroads had ‘outgrown all state limits’. They were licensed bandits, comparable to the ‘fermiers généraux’ of 18th-century France, able to tax the people at will. Only federal legislation would suffice to control them.* In Britain the same type of opposition from businessmen confronted by the railways’ power meant that in the last two decades of the century the normally conservative Chambers of Commerce anticipated later Socialist demands for railway nationalisation.
The sea change in attitudes was summed up by the history of the free passes granted by railways to anyone of influence. In Britain they were largely tokens of the passenger’s importance. In later life George Stephenson took a childish pleasure in flourishing his free pass and being led deferentially to a first-class compartment. The last politician to possess one was also British, the late Earl of Stockton, better known as Harold Macmillan. But this was the result, not of his political activities, but of his directorship of the Great Western Railway before World War II. In the United States they became a sort of currency, which soon became a substantial burden on the railways, who were forced to buy goodwill from all sides of every legislative body with which they came into contact. Politicians came to assume that the pass was theirs as of right, not because the railroads expected their services in return. Ignatius Donnelly, a future populist leader, actually wrote to a railroad president asking for a pass. A few years later he declared passes an abomination.
By the end of the 1870s the American railroads felt beleaguered. With astonishing confidence and political sophistication they turned to the government for protection against their own customers, becoming the leading advocates of federal regulation. In Gabriel Kolko’s words ‘the ogre of government intervention could not have appeared too formidable to men with important political connections’ (Railroads and Regulation).
The result was the Interstate Commerce Commission, the first of many regulatory agencies. Like many of its successors it became a ‘captive’ of the industry it was supposed to regulate within a few years of its establishment in 1887. ‘Well before the end of the century the ICC had reached the stage, described in the writings of political scientists dealing with regulatory commissions in later periods, in which its primary function was to minister to the needs of the industry which it was ostensibly to regulate on behalf of an amorphous, implicitly classless public interest.’24 Even when the ICC took the carriers to court, the railroads’ lawyers ensured that the cases were long-drawn-out (averaging four years) and the judges were generally unfriendly to the regulators. (The Commission won only one of the sixteen cases which reached the Supreme Court between 1887 and 1913.)
But succeeding generations of railwaymen reaped a bitter harvest. A revolt against the cosiness of the early ICC was to lead to sixty years of over-regulation which prevented the railroads from competing effectively with the internal combustion engine.
The Pereires: The Pure Believers
Only in France did – only in France could – railways become a doctrine. Yet they were the rallying cry of a small but dedicated group, called the Saint-Simonians after their founder, Claude Henri de Saint-Simon. They were firm believers in a creed which placed useful, productive labour above all else, and proposed to organise the political process to reflect economic realities as they saw them. To the Saint-Simonians railways were the supreme example of public industrial utility and they worshipped them accordingly.
The Saint-Simonians believed in a corporate state in which everyone’s interests would be represented for them. So they replaced ordinary democracy with an ideal parliament with three chambers: d’invention for artists, examen, effectively the legislature, and execution, corresponding to the executive branch of government. Their high-minded, albeit patronising and autocratic, political ideals were translated into practice during the 1850s and 1860s, during the reign of the Emperor Napoleon III, who found their undoubted capacities enormously useful.
The Saint-Simonian creed struck a particular chord amongst France’s increasingly important technocrats, the naturally auto-cratic, invariably intelligent, hard-working, logical and supremely well-educated graduates of France’s already-powerful Grandes Ecoles, most notably the Polytechnique. Believers included Paulin Talabot, the brilliant engineer responsible for the line from Paris to Marseilles, the influential Michel Chevalier and that visionary diplomat, Ferdinand de Lesseps, creator of the Suez Canal.
But even in this distinguished group the Pereires stood out.25 The brothers Emile and Isaac came from a distinguished Jewish family long-established in France – their grandfather was the first doctor to teach the deaf and make a proper study of their problems. As early as 1832 Isaac propounded the theory, which soon became
part of the group’s core beliefs, that railways were more than a mere means of transport, that they were instruments of civilisation itself. France, he continued, was an isthmus providing the shortest route by land between two great seas. So routes between the North Sea and the channel to the Mediterranean, from say, Le Havre to Marseilles (naturally via Paris) should take precedence over alien routes (Hamburg to Trieste for example).
For the Saint-Simonians, indeed for all the apostles of centrally-directed progress in France, railways quickly became the outstanding symbol of modernity, of scientific progress, all directed by a small group of high-minded, almost Platonic guardians.
Inevitably their high-mindedness brought them into conflict with almost everyone. The Parisians revolted, successfully, when they planned a station, albeit quite a modest, Italianate affair, on the Place de la Madeleine in the heart of their city. And in their subsequent schemes they came up against the great James Rothschild, at first their ally (for some time Emile even had an office in the Rothschild bank), and then their enemy. For him the profit to be made from railways – or any other venture for that matter – was an end in itself. For the Pereires the railways, not just in France, but all over Europe, in Italy and Austria–Hungary in particular, were a crucial element in their vision of the triumph of the good and the efficient.
The Saint-Simonians’ influence and ideas were not confined to railways. The Pereires’ biggest innovation, indeed, was the Credit Mobilier, the first attempt in France to tap the savings of the mass of the population for productive purposes – like railways.
The World the Railways Made Page 10
